In addition to amortisation and depreciation on intangible assets and property, plant and equipment, impairment losses are also recognised on the balance sheet date if the asset’s recoverable amount has fallen below its carrying amount. The recoverable amount is determined as the higher of an asset’s fair value less costs to sell, and the present value of the estimated net future cash flows from continued use of the asset (value in use).
Fair value less costs to sell is derived from recent market transactions, if available.
If it is impossible to forecast expected cash flows for an individual asset, the cash flows for the next larger asset unit are estimated, discounted at a rate reflecting the risk involved, and the recoverable amount allocated to the individual assets in proportion to their respective carrying amounts.
If the reasons for an impairment loss recognised in previous years should cease to exist in whole or in part in subsequent periods, the impairment loss is reversed.